Q2 2024 Sadot Group Inc Earnings Call
Our remarks, we will take questions at this time for opening remarks, and introductions I would like to turn the call over to Frank Parabola Sadat Group Inc's Investor Relations contact.
Before we get started we would like to state that this call may include forward looking statements pursuant to the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of $19 95 to.
To the extent that the information presented on this call discusses financial projections information or expectations about the business plans results of operations products or markets or otherwise make statements about future events.
Such statements may be forward looking such forward looking statements can be identified by the use of words, such as should May intends anticipates believes estimates projects forecasts expects plans and proposes.
Speaker Change: Although management believes that the expectations reflected in these forward looking statements are based on reasonable assumptions. There are a number of risks and uncertainties that could cause actual results to differ materially from such forward. Looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the heading risk factors in.
Speaker Change: <unk> Group, Inc. 's, most recently filed Form 10-Q, and elsewhere and documents that Sadat Group, Inc. Files from time to time with the SEC.
Speaker Change: Forward looking statements speak only as of the date of the document in which they are contained and <unk> does not undertake any duty to update any forward looking statements, except as may be required by law.
Speaker Change: For this call I'll numbers disclosed have been rounded to the closest 100000, unless under $1 million and percentages have been rounded to the closest percent unless otherwise noted.
Speaker Change: All the numbers disclosed in this report are the amounts attributable to <unk> Group, Inc, and exclude the portion related to Noncontrolling interests.
Speaker Change: On this call we will refer to <unk> Group, Inc. S Dot group dot or the company.
Speaker Change: With me on the call today are Sadat group's Chief Executive Officer, Michael Roper, and Chief Financial Officer, Jennifer Black.
Speaker Change: Michael and Jennifer will be presenting prepared remarks relate to soda group's financials filed on August 13, 2024, and those documents may be found on the company's website newswire feeds and on the SEC website link from Sadat group's website at Www Dot Dot Group, Inc. Dot com under the Investor.
Speaker Change: Tap.
Speaker Change: At this point I would like to turn it over to <unk> CEO, Michael <unk> Michael.
Michael Roper: Thanks, Greg Good morning, everyone and thank you for joining us today as we present the results of our second quarter.
Speaker Change: I'm extremely proud to announce that so that group reported the best quarter in six months year to date performance in our company's history delivering significant positive net income and notable improvements in our financial position. This.
Speaker Change: This record breaking performance underscores our resilience and commitment to operational excellence as we execute against our strategic vision.
Speaker Change: Importantly, we consider ourselves to be in the early stages of our growth strategy is the emerging entity in the almost two trillion dollars Agra commodities market as we focus on driving change in the company's business model and transitioning the company into a larger player in the global aggregate model. These market. We believe we are starting to see these efforts reflected in.
Our overall results.
Speaker Change: For the second quarter consolidated revenues increased 9% to $175 million driven by its about Agri foods.
Speaker Change: Net income of $2 4 million exceeded the 190000, we reported in Q2 2023.
Speaker Change: Additionally, our 2024 year to date cumulative net income as a positive $2 million compared to a net loss of 876000 for the same period in 2023.
Speaker Change: Jennifer will discuss the financials in further detail shortly.
Jennifer Black: Overall market conditions in the aggregate model. These sector has started to improve in Q2. Following a challenging Q1 importantly, even though China demand remains a headwind as they focus on domestic production. The company was able to shift to other markets to drive growth, which helped drive the $76 million revenue increase from Q1 <unk>.
Jennifer Black: Find with our corporate strategic growth initiatives and strong execution. This significantly contributed to our Q2 results.
Jennifer Black: In addition to the growth potential within the global average commodity market. We believe several powerful industry trends are converging to support so that groups strategic initiatives and long term success.
Speaker Change: First and foremost the growing global demand for agricultural commodities is expected to be a crucial driver rising population increased urbanization and evolving dietary preferences are all contributing to heightened consumption of food and feed products worldwide. We believe this dynamic creates a favorable backdrop for companies like Sadat group that our.
Speaker Change: <unk> to efficiently originate trade and distribute the central aggregate <unk> <unk>.
Speaker Change: Secondly, the heightened emphasis on food security and sustainability represents a substantial opportunity for Saddam group Gov.
Speaker Change: Governments and international organizations are prioritizing initiatives to ensure stable food supplies and mitigate supply chain risks areas, where our vertically integrated business model featuring both trading in farming operations provides distinct advantages.
Speaker Change: And finally, the ongoing consolidation of diversification trends within the aggregate model sector present exciting inorganic growth opportunities for <unk> group as industry players seek to expand their geographic reach product offerings and value chain integration. We believe we are well positioned to capitalize on strategic acquisitions and partnerships that can further strengthen our market.
Speaker Change: Position.
Speaker Change: By proactively aligning our business model and growth initiatives with these powerful industry drivers. So that group is poised to pursue its position as a leading global player that dynamic any sensual agri commodity market.
Speaker Change: To capture a greater share of this market opportunity, we are strategically expanding our operations and the key supply chain verticals, including farming origination and trading.
Speaker Change: Longer term, we also see significant potential for expansion into other verticals, such as shipping logistics processing and distribution.
Speaker Change: The formation of <unk>, Brazil, and more recently, so that Canada are a direct reflection of this strategy. Both of these new subsidiaries complement our existing operating centers in Miami, Singapore, Dubai in Kiev.
Speaker Change: We remain actively engaged in expanding our global platform and continue exploring further regional expansion opportunities.
Speaker Change: At the beginning of August we announced the key leadership appointments for our newly formed Canadian operation I'd like to take this opportunity to welcome both David Hannah as Executive Vice President General manager and Jaime Reader as Vice President head of feed ingredients for Saddam Canada to this about team their expense extensive experience.
Shipping logistics processing and distribution.
Speaker Change: The formation of that Brazil, and more recently, so that Canada are a direct reflection of this strategy. Both of these new subsidiaries complement our existing operating centers in Miami, Singapore, Dubai in Kiev we've.
Speaker Change: Animals that are expensive experience, but I guess thats accurate too.
Speaker Change: <unk> extensive experience and deep knowledge of the aggregate commodity markets make them invaluable additions to the company. They are combined leadership alongside the professional and dedicated management and team members in Miami, Brazil, and Dubai will be instrumental in advancing so thats global growth agenda by working together to expand trade flows globally.
We remain actively engaged in expanding our global platform and continue exploring further regional expansion opportunities.
At the beginning of August we announced the key leadership appointments for our newly formed Canadian operation.
Speaker Change: Like to take this opportunity to welcome both David Hannah as Executive Vice President General manager and <unk> reader as Vice President head of feed ingredients for Saddam Canada. So this about team their expense extensive experience animals that are expensive experience, but I guess thats accurate too.
Speaker Change: Next let's discuss the farm operations, our farm operations serve as an integral part of the total food supply chain operation.
Speaker Change: Importantly from an aggregate <unk> trading perspective, the farm crop allows the company to trade year round with the underlying commodity as collateral in case, the market turns negative helping to insulate us from market fluctuations.
Speaker Change: <unk> extensive experience and deep knowledge of the aggregate model markets make them invaluable additions to the company Theyre combined leadership alongside the professional and dedicated management and team members in Miami, Brazil, and Dubai will be instrumental in advancing so thats global growth agenda by working together to expand trade flows globally.
Speaker Change: Increasing our farming capabilities and strategic locations worldwide will continue to be an important focus point for the company, allowing us to expand our trading food security and community impact endeavors around these farms.
Speaker Change: Next let's discuss the farm operations, our farm operations serve as an integral part of the total food supply chain operation.
Speaker Change: Regarding our legacy restaurant business as we've been actively pursuing the divestiture of these noncore assets to focus on our agro commodity origination trading and shipping and farming. The company has engaged with numerous potential buyers, resulting in the recently announced sale of Super Foods.
Speaker Change: Importantly from an aggregate <unk> trading perspective, the farm crop allows the company to trade year round with the underlying commodity as collateral in case, the market turns negative helping to insulate us from market fluctuations.
Speaker Change: This transaction is the first of three restaurant concepts to be sold from our portfolio as the first step in our overall strategic plan to exit the restaurant business. We expect the divestiture of these noncore assets to drive operational savings and simplification. This will ensure our resources are firmly aligned around the company its highest potential.
Speaker Change: Increasing our farming capabilities and strategic locations worldwide will continue to be an important focus point for the company, allowing us to expand our trading food security and community impact endeavors around these farms.
Speaker Change: Regarding our legacy restaurant business as we've been actively pursuing the divestiture of these noncore assets to focus on our average commodity origination trading and shipping and farming. The company has engaged with numerous potential buyers, resulting in the recently announced sale of Super Foods. This transaction is the first of three restaurant concepts to be so.
Speaker Change: <unk> in the agro commodities market.
Speaker Change: Regarding muscle maker Grill restaurants, we have recently completed the process of converting corporate owned and operated muscle maker grill locations to franchise locations. We believe this concept is now positioned to potentially attract a wider base of interested parties.
Speaker Change: <unk> from our portfolio as a first step in our overall strategic plan to exit the restaurant business. We expect the divestiture of these noncore assets to drive operational savings and simplification. This will ensure our resources are firmly aligned around the company's highest potential opportunities in the agro commodities market.
Speaker Change: For poking Modo this likely will be the largest transaction of the three concepts and we are in negotiations in detailed discussions with several groups for the sale of our polka motor concept concept of which there is no guarantee.
Speaker Change: As the sale of each concept occurs we expect to reduce G&A expenses potentially enhancing the bottom line, while simultaneously generating cash flow into the business.
Speaker Change: Regarding muscle maker Grill restaurants, we have recently completed the process of converting corporate owned and operated muscle maker grill locations to franchise locations. We believe this concept is now positioned potentially attract a wider base of interested parties.
Jennifer Black: Now I'd like to turn the call over to our CFO, Jennifer Black to review more specifics of the financial performance of the company for the second quarter of 2020 for Jennifer. Thank you Mike before I begin. Please note that our financial results for the quarter ending June 32024, and Form 10-Q were filed with the SEC yesterday.
Speaker Change: For Pokey Modo this likely will be the largest transaction of the three concepts and we are in negotiations in detailed discussions with several groups for the sale of our polka motive.
Speaker Change: On Sept of which there is no guarantee.
Speaker Change: August 13, 2024, along with the press release on that thank you.
Speaker Change: As the sale of each concept occurs we expect to reduce G&A expenses potentially enhancing the bottom line, while simultaneously generating cash flow into the business.
Jennifer Black: Our consolidated revenues increased 9% to 175 million in the second quarter at 2024 compared to $160 6 million for the same quarter in 2023.
Jennifer Black: Now I'd like to turn the call over to our CFO, Jennifer Black to review more specifics of the financial performance of the company for the second quarter of 2020 for Jennifer. Thank you Mike before I begin. Please note that our financial results for the quarter ending June 32024, and Form 10-Q filed with the SEC yesterday.
Speaker Change: Our aggregates segment accounted for the majority of our revenue contributing $173 3 million in the second quarter as we completed 21 transactions across eight different countries.
Speaker Change: August 13, 2024, along with the press release on that thank you.
Speaker Change: And final completed its first full year of harvest and in Q2 harvests today over 2500 metric tons of meat and 690 metric ton facility.
Jennifer Black: Our consolidated revenues increased 9% to $175 million in the second quarter at 2024 compared to $160 6 million for the same quarter in 2023.
Our legacy restaurant operation, which are classified as held for sale had $1 7 million of revenue in Q2.
Speaker Change: SG&A expense of $2 4 million for the quarter increased by over 500000 versus a year ago, mainly due to the upfront cost associated with the opening and expansion of our sadat aggregate trading offices, which are integral to our growth strategy.
Speaker Change: Our Sudan aggregates segment accounted for the majority of our revenue contributing $173 3 million in the second quarter as we completed 21 transactions across eight different countries.
Speaker Change: The farm completed its first full year of harvest and in Q2 harvests today about 2500 metric tons of maize and 690 metric tons of soy.
Speaker Change: Net income at $2 4 million like a notable improvement from the 190000 for <unk> 2023.
Speaker Change: Our legacy restaurant operations, which are classified as held for sale at $1 7 million of revenue in Q2.
Speaker Change: EBITDA was $3 2 million compared to 636000 in the second quarter of 2023.
Speaker Change: SG&A expense of $2 4 million for the quarter increased by over 500000 versus a year ago, mainly due to the upfront costs associated with the opening and expansion of our sadat aggregate trading offices, which are integral to our growth strategy.
Speaker Change: Now looking at our balance sheet. The company had a cash balance of $10 million and working capital surplus of $16 1 million, reflecting strengthened financial stability. This compares to a cash balance of $1 2 million and working capital surplus at $13 2 million as of March 31 2024.
Speaker Change: Net income at $2 4 million was a notable improvement from the 190000 for Q2 2023.
Speaker Change: It is important to note.
Speaker Change: As a part of our ongoing strategy, we continually invest our cash back into the aggregate commodity trading business to increase our revenues or to add strategic assets.
Speaker Change: EBITDA was $3 2 million compared to 656000 in the second quarter of 2023.
Speaker Change: Now looking at our balance sheet. The company had a cash balance of $10 million and a working capital surplus of $16 1 million, reflecting strengthened financial stability. This compares to a cash balance of $1 2 million and working capital surplus at $13 2 million as of March 31 2024.
Speaker Change: The company is expect to market risks, primarily related to the volatility and the profit carbon offset units and food and feed commodities to manage these risks we entered into forward sales contracts and hedges from time to time and forward sales contracts are initially measured at fair value and any changes in fair value are recorded as a gain or loss on a fair.
Speaker Change: It is important to note that.
Speaker Change: Your value re measurement and.
Speaker Change: As a part of our ongoing strategy, we continually invest our cash back into the aggregate commodity trading business to increase our revenues or to add strategic assets.
Speaker Change: And mark to market gain on these derivative transactions resulted in an income of approximately $3 3 million for the quarter.
Speaker Change: We are proud to report our best three and six month performance in the company's history.
Speaker Change: The company is exposed to market risks, primarily related to the volatility and the profit carbon offset units and food and feed commodities to manage these risks we entered into forward sales contracts and hedges from time to time. The forward sales contracts are initially measured at fair value and any changes in fair value are recorded as a gain or loss on the <unk>.
Speaker Change: Significant positive change is occurring across our business, enabling us to deliver improved revenue streams and increased working capital surplus and higher cash balance we're continuing to strengthen our balance sheet. While also reducing expenses as we divested the restaurant concepts with that I'd like to return the call back over to Michael Webber. Thanks.
Speaker Change: Fair value re measurement.
Speaker Change: And mark to market gain on these derivative transactions resulted in an income of approximately $3 3 million for the quarter.
Speaker Change: Thanks for the financial overview Jennifer.
Michael Webber: In closing I want to thank all of our investors and stakeholders for your time and continued support of <unk> group. We're extremely proud of the progress we've made in positioning the company for sustainable long term growth and we remain firmly committed to executing our strategic vision.
Speaker Change: We are proud to report our best three and six month performance in the Companys history.
Michael rubber: Significant positive change is occurring across our business, enabling us to deliver improved revenue streams and increase working capital surplus and higher cash balances were continuing to strengthen our balance sheet. While also reducing expenses as we divested our restaurant concepts with that I'd like to return the call back over to Michael rubber. Thanks.
Speaker Change: As I've outlined today, we believe the combination of our growth potential in the vast global aggregate model market, our improved financial performance and strong balance sheet, our innovative risk management approach and our experienced leadership team provide us a compelling case for Sadat group.
Michael: Thanks for the financial overview Jennifer.
Speaker Change: Supported by powerful industry trends <unk>, we believe in our ability to continue driving value for our shareholders.
Michael rubber: In closing I want to thank all of our investors and stakeholders for your time and continued support of stock group. We're extremely proud of the progress we've made in positioning the company for sustainable long term growth and we remain firmly committed to executing our strategic vision.
Looking ahead, we will maintain our disciplined focus on expanding our trading operations diversifying our geographic footprint and further integrating our farm assets to create synergies across the supply chain at the same time, we will judiciously manage costs and capital allocation to enhance profitability and returns.
Michael rubber: As I've outlined today, we believe the combination of our growth potential in the vast global agri commodity market, our improved financial performance and strong balance sheet, our innovative risk management approach and our experienced leadership team provides us a compelling case for sort of that group.
Speaker Change: You again for your time, and we look forward to updating you on our continued progress in the months and years ahead.
Speaker Change: With that please give us a few moments, while we open up the lines for questions.
Michael rubber: Supported by powerful industry trends in <unk>, we believe in our ability to continue driving value for our shareholders.
Michael rubber: Looking ahead, we will maintain our disciplined focus on expanding our trading operations diversifying our geographic footprint and further integrating our farm assets to create synergies across the supply chain at the same time, we will judiciously manage costs and capital allocation to enhance profitability and returns.
Speaker Change: Thank you Michael before we get to questions from our selected analysts I believe you have some questions to address which you received from the stakeholders.
Yes, I do Alexa thanks.
Speaker Change: Everyone. We normally get questions that gets submitted to our IR.
Michael rubber: Thank you again for your time, and we look forward to updating you on our continued progress in the months and years ahead.
Speaker Change: E Mail address we try to accumulate these and kind of come up with a common theme and address those questions before we open it up to the analysts to make sure that we're addressing.
Speaker Change: With that please give us a few moments, while we open up the lines for questions.
Speaker Change: Out of the common questions that are out there. So the first question. We have four of them to go through the first question I have is can you elaborate on the potential growth opportunities in the one nine trillion global agro commodity market and what does the dot group strategy to capture a larger share of this market.
Speaker Change: Thank you Michael before we get to questions from our selected analysts I believe you have some questions to address which you received from the stakeholders.
Speaker Change: Yes, I do like to thanks.
Speaker Change: So the global aggregate modeling market. It represents an opportunity for <unk> with an estimated annual value at nearly two trillion dollars. It's a big market right our strategy to capture a greater share of this market involves actively expanding our training operations through strategic initiatives such as the formation of <unk>, Brazil, <unk>, Canada that we reach.
Speaker Change: Everyone. We normally get questions that gets submitted to our IR E.
Speaker Change: E Mail address we try to accumulate these and kind of come up with a common theme and address those questions before we open it up to the analysts to make sure that we're addressing.
Speaker Change: Out of the common questions that are out there. So the first question. We have four of them to go through the first question I have is can you elaborate on the potential growth opportunities in the one nine trillion global agro commodity market and what is the Dot group strategy to capture a larger share of this market.
Speaker Change: We announced these new entities complement our existing trading hubs they allow us to facilitate trade flows to and from key regions, such as North America Africa.
Speaker Change: Black Sea, Indonesia et cetera.
Speaker Change: So the global aggregate mining market. It represents an opportunity for <unk> with an estimated annual value of nearly two trillion dollars. It's a big market right our strategy to capture a greater share of this market involves actively expanding our training operations through strategic initiatives, such as the formation of slot, Brazil and Canada.
Speaker Change: By diversifying our geographic presence and expanding our trading capabilities, we aim to position so that as a larger player in the global aggregate model. These market now one of the things I want to kind of talk to us that's kind of the horizontal expansion right and we also plan on expanding vertically into additional aspects of the global agro commodity supply chain and we actually see the <unk>.
Speaker Change: We announced these new entities complement our existing trading hubs they allow us to facilitate trade flows to and from key regions, such as North America Africa.
Speaker Change: History does provide into like three segments or three components number one is the upstream segment that kind of represents the origins of the product and like farming thats in emerging markets. The second segment is really classify it as midstream I know im being very technical here.
Speaker Change: Black Sea, Indonesia et cetera.
Speaker Change: By diversifying our geographic presence expanding our trading capabilities, we aim to position so that as a larger player in the global aggregate commodities market now one of the things I want to kind of talk to us that's kind of the horizontal expansion right and we also plan on expanding vertically into additional aspects of the global agro commodity supply chain and we actually see the <unk>.
Speaker Change: Midstream, which is really trading logistics and infrastructure and then there's like downstream right, which is processing capacity in the ingredients and feed industries.
Speaker Change: Through different geographies, Okay, where we can contribute values also like the three areas that were currently operating in the upstream and midstream segments of the markets and when there is ample room to expand there within those segments right, but as we evolve and grow our goal is to continue capturing additional capabilities, that's going to allow us to expand vertically and fully integrator operating.
Speaker Change: This provided into like three segments or three components number one is the upstream segments that kind of represents the origins of the product I like farming thats in emerging markets. The second segment is really classify it as midstream I know im being very technical here.
Speaker Change: Okay.
Speaker Change: Midstream.
Jennifer Black: So Jennifer you want to take the next one sure. Our next question, we have as windmill, Brazil, and Canada contribute to the top line revenue.
Which is really trading logistics and infrastructure and then there's like downstream right, which is processing capacity in the ingredients and feed industries.
Speaker Change: And with that Brazil is a crucial geography for any company involved in aggregate supply chain, our expansion into Brazil data formation as did our Brazil has been a key strategic Starkey, Jack sorry priority over the past year Aegean.
Speaker Change: Through different geographies, Okay, where we can contribute values also like the three areas that were currently operating in the upstream and midstream segments of the market over there is ample room to expand there within those segments right, but as we evolve and grow our goal is to continue capturing additional capabilities, that's going to allow us to expand vertically and are fully integrator.
Speaker Change: The team is building important foundation to support our strategy and goals in this region.
Speaker Change: Since we reported our first Springhill trade in July the team has been involved in several other transactions rounding Stephanie and are heavily involved with our new Canadian subsidiary as well as other regions lining up future trades.
Speaker Change: <unk>.
Jennifer Black: So Jennifer you want to take the next one sure. Our next question, we have as windmill, Brazil, and Canada contribute to the top line revenue.
Speaker Change: And with that Brazil is a crucial geography for any company involved in aggregate supply chain, our expansion into Brazil data formation of set off Brazil has been a key strategic start T. Jack sorry priority over the past year Aegean.
Speaker Change: Building these foundations require a deep understanding in connection with the professionals on the ground. The Sadat, Brazil office is establishing relationships with local producers intermediaries and end users to grow the company's presence in Brazil and in the future allow us to leverage our global distribution network and risk management expertise.
Speaker Change: The team is building important foundation to support our strategy and goals in this region.
Speaker Change: Since we reported our first Brazil trade in July the team has been involved in several other transactions surrounding Stephanie and are heavily involved with our new Canadian subsidiary as well as other regions lining up future trains.
Speaker Change: Sadat, Canada is our most recent addition to our global trading team led by David Hannah and Jaime Rita <unk>.
Speaker Change: The team in Canada is currently focused on the Canadian pulses market building out its origination capabilities, securing financing facilities and finalizing strategic partnerships to ensure a smooth market entry. The sadat candidates gene is in the process of introducing the new entity to the local market farmers exporters global trading Counterparties.
Speaker Change: Building these foundations require a deep understanding in connection with the professionals on the ground.
Speaker Change: <unk>, Brazil office is establishing relationships with local producers intermediaries and end users to grow the companys presence in Brazil and in the future allow us to leverage our global distribution network and risk management expertise.
Speaker Change: Although we cannot provide a specific guarantee we anticipate this to that Canada will begin executing trades in Q4.
Speaker Change: So that Canada is our most recent addition to our global trading team led by David Hannah and Jaime Rita <unk>.
Speaker Change: It's important to note that Sadat, Canada model will focus on smaller container size trades and these have the trades are usually more frequently and have higher margins.
Speaker Change: The team in Canada is currently focused on the Canadian pulses market building out its origination capabilities, securing financing facilities and finalizing strategic partnerships to ensure a smooth market entry.
Speaker Change: And the next question. We have is what is July revenue look like and are you anticipating revenues to remain in the $175 million to $200 million range for Q3.
Speaker Change: Canada.
Speaker Change: Is in a process of introducing the new entity to the local market farmers X orders global trading Counterparties.
Speaker Change: And I am pleased to report that our July 2024 revenue came in at approximately $61 million continuing the positive momentum we saw in Q2 and an increase of roughly 15% from July 2023.
Speaker Change: Although we cannot provide a specific guarantee we anticipate this without Canada will begin executing trades in Q4.
Speaker Change: It's important to note that Sadat, Canada model will focus on smaller container size trades and these have the trades are usually more frequent and have higher margins.
Speaker Change: Our team remains focused on executing our strategic growth initiatives prudently, managing our risk and driving increased value for our shareholders.
Speaker Change: And the next question. We have is what is July revenue look like and are you anticipating revenues to remain in the $175 million to $200 million range for Q3.
Speaker Change: Mike.
Speaker Change: So the next one I got another question here for both second luxury right one.
Speaker Change: So the last question, we have here before going live with the analysts is can I provide more details on the divestiture of the restaurant assets what is the anticipated timeline and expected impact on the company's financials.
Speaker Change: I am pleased to report that our July 2024 revenue came in at approximately $61 million continuing the positive momentum we saw in Q2 and an increase of roughly 15% from July 2023.
Speaker Change: So as you guys know we are actively pursuing the divestiture of our noncore restaurant assets, which is a key part to our strategic plan that allow us to focus on the aggregate commodity business right. That's our core business. So we want to focus on that.
Speaker Change: Our team remains focused on executing our strategic growth initiatives prudently, managing our risk and driving increased value for our shareholders.
Speaker Change: Mike.
Speaker Change: Go to next one I got another question here for the second luxury right one.
Speaker Change: Instead of going to worry about the restaurants, we've already completed the sale of Super fit foods meal Prep service, which we announced a few weeks ago in a weird at various stages of due diligence for the remaining concepts of muscle maker grill restaurants on pokey modal.
Speaker Change: So the last question, we have here before going on wipes. The analysts is can I provide more details on the divestiture of the restaurant assets what is the anticipated timeline and expected impact on the company's financials.
Speaker Change: I think I mentioned earlier, we've actually got the silver groups that we're talking to are regarding muscle maker and pokey modal in the different stages of those discussions.
Speaker Change: So as you guys know we are actively pursuing the divestiture of our noncore restaurant assets, which is a key part to our strategic plan that allow us to focus on the aggregate probably business right. That's our core business, we want to focus on that.
Speaker Change: We compete complete the sale of each restaurant concepts and we do expect to see a reduction in our G&A expenses, which should enhance our bottom line performance. Additionally, the divestitures will generate cash flow that we can reinvest in the us about agro food operations that will support our growth initiatives.
Speaker Change: Instead of worrying about the restaurants, we've already completed the sale of Super Foods meal Prep service, which we announced a few weeks ago in a weird at various stages of due diligence for the remaining concepts and muscle maker grill restaurants, and pokey modal.
Speaker Change: While a specific timeline for the remaining divestitures is still being finalized we are working diligently to complete these transactions and further streamline our business model, let me highlight here quick.
Speaker Change: I think I mentioned earlier, we've actually got silver groups that we're talking to are regarding muscle maker in okimoto are at different stages of those discussions.
Speaker Change: The recent Super good food transaction, along with the sale of the final company owned muscle maker Grill restaurant, where we converted into a franchise location and the closing of an underperforming location kind of lumping all of those together.
Speaker Change: We compete complete the sale of each restaurant concepts and we do expect to see a reduction in our G&A expenses, which should enhance our bottom line performance. Additionally, the divestitures will generate cash flow that we can reinvest in this about agrifood operations, who will support our growth initiatives.
Speaker Change: These transactions all occurred in early Q3 of 2024 here.
Speaker Change: With these recent moves we believe our expenses were reduced by an estimated 400 plus thousand dollars per year on an annualized basis as we eliminate the overhead associated with operating these locations.
Speaker Change: While a specific timeline for the remaining divestitures is still being finalized we are working diligently to complete these transactions and further streamline our business model, let me highlight here quick.
Speaker Change: Importantly, the current and future cash proceeds of roughly about 400000 as well from these transactions will be reinvested back into the business. So we believe Superfoods foods represents the smallest transaction of the three concepts with multi modal likely to be the largest and like I said earlier, we are in detailed discussions with multiple groups or both.
Speaker Change: The recent superfood transaction, along with the sale of the final company owned muscle acre Grill restaurant, where we converted into a franchise location and the closing of an underperforming location and alumina all those together.
Speaker Change: In these transactions all occurred in early Q3 of 2024 here with.
Speaker Change: With these recent moves we believe our expenses were reduced by an estimated 400 plus thousand dollars per year on an annualized basis as we eliminate the overhead associated with operating these locations.
Speaker Change: Laker Grill, and Pokey modal and we view the successful completion of Super Foods sales is an important milestone in our strategic transformation into a more streamlined and higher margin agricultural company right again, when we get rid of the restaurants and take that money and redeploy it towards the Sadat agribusiness.
Speaker Change: Importantly, the current and future cash proceeds of roughly about 400000 as well from these transactions will be reinvested back into the business. So we believe Super foods represents the smallest transaction of the three concepts with pokey modal likely to be the largest and like I said earlier, we are in detailed discussions with multiple groups or above most of.
Speaker Change: So with that.
I think that answers all the questions that we kind of summarized here so with <unk> do you want to take it over to the.
Analysts online.
Speaker Change: Thanks, Michael I would like to open the call to Aaron Grey with AGP for questions first please.
Speaker Change: <unk> Grill, and Pokey modal and we view the successful completion of Super Foods sales is an important milestone in our strategic transformation into a more streamlined and higher margin aggregate amount of the company.
Aaron Grey: Alright, Thank you for the questions and nice improvement in the quarter here.
Aaron Grey: So first one for me.
Speaker Change: Again, when we get rid of the restaurants and take that money and redeploy it towards the Sadat agribusiness.
Aaron Grey: Just in terms of the the agro food business commodity business.
Speaker Change: I know there can be some volatility there saw a nice pick up there sequentially.
Speaker Change: So with that.
Alexa: I think I've answered all the questions that we kind of summarized here. So Alexa do you want to take it over to the <unk>.
Speaker Change: In the quarter, so wanted to get a better line of sight in terms of whether or not youre seeing.
Alexa: <unk> yeah, Thanks, Michael I would like to open the call to Aaron Grey with AGP for questions first please.
Speaker Change: More line of sight yourselves in terms of the trajectory of where sales can go do you believe there will still be some more volatility I know youre getting more diversified entering new markets. So just some more context of where you think the top line within that business can go from here. Thank you.
Aaron Grey: Alright, Thank you further questions and a nice improvement in the quarter here.
Aaron Grey: So first one for me.
Aaron Grey: Just in terms of the the Agrifood business commodity business.
Jennifer Black: Thanks, Eric So a couple of things and I'll, let Jennifer jump in here as well, but I'd like to start off.
Speaker Change: I know there can be some volatility there saw a nice pick up there sequentially.
Jennifer Black: <unk> mentioned.
Speaker Change: We saw July come in at a little over $61 million for the months. So thats a good start to the quarter. So.
Speaker Change: In the quarter, so wanted to get a better line of sight in terms of whether or not youre seeing.
Speaker Change: So we're continuing to see that build that momentum after the after the poor performance in Q1, right, which was attributed to the China market more than anything so China has become more stabilized.
Speaker Change: More line of sight yourselves in terms of the trajectory of where sales can go do you believe there will still be some more volatility I know youre getting more diversified entering new markets. So just some more context of where you think of the top line within that business can go from here. Thank you.
Speaker Change: They are still focusing on their domestic production, but us as a company have been.
Speaker Change: Pretty resilient and being able to move a lot of the trades business to other parts of the world and I think that's really key about the future of where we see kind of some of the revenue is going as as we continue to grow by adding so that Brazil, and adding candidate here recently and obviously hopefully some more as we move forward.
Speaker Change: Okay. Thanks, Eric So a couple of things and I'll, let Jennifer jump in here as well, but I'd like to start off.
Speaker Change: The aforementioned.
Speaker Change: We saw July come in at a little over $61 million for the months. So thats a good start to the quarter. So.
Speaker Change: So we're continuing to see that build that momentum after the after the poor performance in Q1, right, which was attributed to the China market more than anything so China has become more stabilized.
Speaker Change: It just gives us more diversification that allows us to move around so we can try to stabilize some.
Speaker Change: Some of the fluctuations that you talked to some of the variations that might happen thats out there and I think we kind of prove that in Q2 and now the beginning of Q3 as well so.
Speaker Change: They are still focusing on their domestic production both us as a company have been.
Speaker Change: Pretty resilient to be able to book a lot of the trades business to other parts of the world and I think that's really key about the future of where we see kind of some of the revenue is going as as we continue to grow by adding so that Brazil in and adding Canada here recently, and obviously hopefully some more as we move forward.
Speaker Change:
Speaker Change: So from a stability standpoint, I think that bodes well for us as.
Speaker Change: As we move forward, but like you mentioned as always.
Speaker Change: Fluctuations that are out there, but I think we're nimble enough and have a wide enough.
Speaker Change: Our footprint now or whatever to really start being able to manage around some of those things.
Speaker Change: It just gives us more diversification that allows us to move around so we can try to stabilize some.
Speaker Change: Okay I appreciate that color, Michael and second one for me on the gross margin nice improvement there as well.
Speaker Change: Some of the fluctuations that you talked to some of the variations that might happen that's out there and I think we kind of prove that in Q2 and now the beginning of Q3 as well.
Speaker Change: So.
Speaker Change: On a similar level or are you already seeing some of the benefits of the trade financing that.
Speaker Change: So.
Speaker Change: So from a stability standpoint, I think that bodes well for us as.
Speaker Change: <unk> gross margin or was that more so just the trades are made during the quarter that really led to the improvement.
Speaker Change: As we move forward, but like you mentioned as always.
Speaker Change: Fluctuations that are out there, but I think we're nimble enough and have a wide enough.
Speaker Change: <unk>.
Speaker Change: Similar question to what I asked before but on the gross margin here in terms of how we should think about the margin profile for the different trades, youre, making either via products or geographies over the next couple of quarters. Thank you.
Speaker Change: Our footprint now or whatever to really start being able to manage around some of those things.
Speaker Change: Okay I appreciate that color, Michael and the second one for me on the gross margin nice improvement there as well.
Thanks, Erin on this one it's really was the trades that we did this quarter that generated those margins.
Speaker Change: So.
Speaker Change: On a similar level or are you already seeing some of the benefits of the trade financing that.
Speaker Change: We haven't really been able to dive deep into the trade finance part yet and so this has all been done it organically.
Speaker Change: <unk> gross margin or was that more so just the trades are made during the quarter that really led to the improvement.
Speaker Change: And when it comes to kind of how we're going to manage it in the future. That's the whole reason we are diversifying.
Speaker Change: <unk>.
Similar question to what I asked before but on the gross margin here in terms of how we should think about the margin profile for the different trades, youre, making either via products or geographies over the next couple of quarters. Thank you.
Speaker Change: We're looking at difference.
Speaker Change: Different segments like we said with the opening of Brazil, and Canada and with those entering these new markets. We're entering new areas like we said, we add with Brazil, we get the App.
Speaker Change: Thanks, Erin on this one it's really was the trades that we did this quarter that generated those margins.
Speaker Change: Just went blank stephney, sorry, Stephanie and then when we go into Canada, we're doing the pulses, which are the smaller containers and like I said earlier, the smaller containers tend to generate higher gross margins and when you have more options.
Speaker Change: We haven't really been able to dive deep into the trade finance part yet and so this has all been done it organically.
Speaker Change: When it comes to kind of how we're going to manage it in the future. That's the whole reason we are diversifying.
Yes that led to shift the money or shift the shift of resources onto where youre seeing that could help generate better margins.
Speaker Change: We're looking at difference.
Speaker Change: Different segments like we said with the opening of Brazil, and Canada and with those entering these new markets. We're entering new areas like we said, we at with Brazil, We get the App.
Speaker Change: And I think that just to reiterate I think part of the key there as we move forward as Jennifer mentioned is the Canadian business model as we bring that one online that one really is more oriented towards container size orders versus entire cargo ship orders and so theres a lot more frequency and a lot more transactions that happened through.
Stephney: Just went blank stephney, sorry, definitely and then when we go into Canada, we're doing the pulses, which are the smaller containers and like I said earlier, the smaller containers tend to generate higher gross margins and when you have more options.
Speaker Change: But those do tend to be higher margin items in general than the container ships as well so as we enter mix of that in there that should help.
Stephney: Yes that led to shift the money or shifts to shift our resources onto where youre seeing that can help generate better margins.
Speaker Change: Address some of the margin flux.
Speaker Change: And I think that just to reiterate I think part of the key there as we move forward as Jennifer mentioned is the Canadian business model as we bring that one online that one really is more oriented towards container size orders versus entire cargo ship orders and so theres a lot more frequency of a lot more transactions that happened through.
Speaker Change: Fluctuations that we see with some of the larger container ships, and then obviously going into different products.
Speaker Change: Products as well as <unk> had mentioned, we got into Sesame now range, so different products different times of the year et cetera have difference.
Speaker Change: Margins that are in there so having a wider options base that's out there for us bodes well.
Speaker Change: And in addition to that with there always been volatility we do hedge to.
Speaker Change: But those do tend to be higher margin items in general than the container ships as well so as we enter mix of that in there that should help.
Speaker Change: To mitigate that risk, which.
Speaker Change: As always it does kind of lower some of that but it also is more secure and safer to hedge those risks.
Speaker Change: Address some of the margin flux.
Speaker Change: Fluctuations that we see with some of the larger container ships, and then obviously going into different products.
Speaker Change: Understood. Thanks for that color that I'll go and jump back in the queue.
Speaker Change: Products as well excuse Mike had mentioned, we got into Sesame now right and so as we do with different products different times of year et cetera have difference.
Speaker Change: Great. Thanks, Erin I'd like to open the questions for Tom Kerr with Zacks.
Mike: Margins that are in there so having a wider option base that's out there for us bodes well.
Speaker Change: Good morning can you hear me yes.
Tom Kerr: Yes. Thank you.
Mike: And in addition to that when Theyre always being volatility we do hedge to.
Tom Kerr: Just a question on the operating cash flow, which was really strong I think over $8 million in the quarter.
Mike: To mitigate that risk, which.
Tom Kerr: What were the working capital components that drive that and does that do they cycle back and forth, where we may not see strong operating cash flow in the second half of the year.
Mike: As always it does kind of lower some of that but it also is more secure and safer to hedge those risks.
Speaker Change: Understood. Thanks for that color that I'll go and jump back in the queue.
Tom Kerr: The right color on how that works.
Speaker Change: Great. Thanks, Erin I'd like to open the questions.
Speaker Change: Absolutely and all of these are going to come down to timing John.
Speaker Change: Sure Tom Kerr with Zacks.
Speaker Change: When payments are received and when they are redeployed our strategy has been and will continue to be to reinvest our cash into the company to put that cash to work and generate margin. We don't want to sit on a bunch of cash and I know a lot of people like that especially analysts do you I guess to have cash on the books, but we want to use that cash in <unk>.
Tom Kerr: Good morning can you hear me yes.
Speaker Change: Yes. Thank you.
Tom Kerr: Just a question on the operating cash flow, which was really strong I think over $8 million in the quarter.
Tom Kerr: What were the working capital components that drive that and does that do they cycle back and forth, where we may not see strong operating cash flow in the second half of the year.
Speaker Change: Generate additional margin and so this quarter, yes, we did have a high cash balance and that was due to timing of the receipt of payments.
Speaker Change: Alright color on how that works.
Speaker Change: Absolutely and all of these are going to come down to timing John.
Speaker Change: And we.
Speaker Change: We're deploying those back out and trying to earn money and earn revenue on that cash.
Speaker Change: When payments are received and when they are redeployed our strategy has been and will continue to be to reinvest our cash into the company to put that cash to work and generate margin. We don't want to sit on a bunch of cash and I know a lot of people like that especially analysts you I guess to have cash on the books, but we want to use that cash and <unk>.
Speaker Change: Okay that makes sense and going back to the commodity gross margins I think it was a one 1% and you kind of discussed this a little bit but.
Speaker Change: It's not where we want to be right.
Have you publicly talk about long term goals for gross margin.
Speaker Change: <unk> additional margin and so this quarter, yes, we did have a high cash balance and that was due to timing of the receipt of payments.
Speaker Change: Yeah, I'm not sure I mean look every months of higher gross margin rate. There's no question about that and we've talked for the past and continue to look as we move forward ways to increase the overall profitability of the company even beyond just rates right. So really keeps focusing on trades, but as we as we continue to move into the farming aspect and some of the other <unk>.
Speaker Change: <unk>.
Speaker Change: We're deploying those back out and trying to earn money and earn revenue on that cash.
Speaker Change: Okay that makes sense and going back to the commodity gross margins I think it was a one 1% and you kind of discussed this a little bit but.
Speaker Change: Aspects of it are there and if we get into <unk>.
Speaker Change: Shipping or any other areas those will help drive some of the margin numbers as we mentioned about Canada.
Speaker Change: It's not where we want to be right.
Speaker Change: Have you publicly talked about long term goals for growth margin.
Speaker Change: Smaller trades tend to drive larger margins as well so as they come online that should help push that but reality is it's it's.
Speaker Change: Yeah, I'm not sure I mean look every months of higher gross margin right. There is no question about that we've talked in the past and continue to look as we move forward ways to increase the overall profitability of the company even beyond just rates right. So really keeps focusing on trades, but as we as we continue to move into the farming aspect and some of the other app.
Speaker Change: In this industry. It is just kind of depends on seasonality. It depends on the products you have in the deals you make or whatever that are out there what's kind of happening in the market. So yes, we'd like to see higher margins.
Speaker Change: We had some higher margins in the past we've had lower margins in the past right. So I do think in that one to three range or whatever is where we want to be.
Speaker Change: Specs that are there and if we get into <unk>.
Speaker Change: Shipping or any other areas those will help drive some of the margin numbers as we mentioned about Canada. Those those smaller trades tend to drive larger margins as well so as they come online that should help push that but reality is.
Speaker Change: Where we can achieve.
Speaker Change: But again just kind of depends on the.
Speaker Change: The timing of the year and the different products that are happening in the marketplace I know that doesn't give us distinct answer.
Speaker Change: In this industry. It is just kind of depends on seasonality. It depends on the products you have in the deals you make or whenever that are out there what's kind of happening in the market. So yes, we'd like to see higher margins.
Speaker Change: Government <unk>.
Speaker Change: As good as I can get.
Speaker Change: <unk>.
Speaker Change: That's helpful.
Speaker Change: And in addition to that you know once once we get all these trade finance lines kicked in and going and optimize it will provide better return on equity.
Speaker Change: We've had some higher margins in the past we've had lower margins in the past right. So I do think in that one to three range or whatever is where we want to be.
Speaker Change: And two more quick ones from me back to the trade financing you put a number on it last quarter I think he had up to $26 million availability is it.
Speaker Change: Where we can achieve.
Speaker Change: Other began just kind of depends on the.
Speaker Change: Is that continuing to increase or change or its still basically at that same point, we are working though we're getting closer on multiple other.
Speaker Change: The timing of the year and the different products that are happening in the marketplace I know that doesn't give us distinct answer.
Speaker Change: But that's probably about as good as I can get.
Speaker Change: <unk>.
Speaker Change: That's helpful.
Speaker Change: Trade finance options that could be significantly larger if they come through.
Speaker Change: In addition to that you know once once we get all these trade finance lines kicked in and going and optimize it will provide better return on equity.
Speaker Change: So we continue to work on that I think what's really more important as part of it is we've been able to deliver we delivered with the trade finance lines that we do have right and so and it's bringing some of those more online. If you want to say as we move forward, we just bode well for the future on it but we have been able to accomplish what we have.
Speaker Change: Yes, and two more quick ones from me back.
Speaker Change: Back to the trade financing put a number on it last quarter I think he had up to 26 million availability as it.
Speaker Change: Does that continue to increase or change or its still basically at that same point, we are working though we're getting closer on multiple other.
Speaker Change: So far just with what we have today and there is other options out there that we are utilizing their not just trade finance line.
Speaker Change: Trade finance options that could be significantly larger if they come through.
Speaker Change: And then we're looking into like supplier crowded.
Speaker Change: Insurances and other options that allow you to tap in there without actually having trade finance.
Speaker Change: So we continue to work on that I think what's really more important is part of it is we've been able to deliver we delivered with the trade finance lines that we do have right and so and it's bringing some of those more online. If you want to say as we move forward, we just bode well for the future on it but we have been able to accomplish what we have.
Speaker Change: Got it Okay last one from me is did I hear you say super fit proceeds were $400000.
Speaker Change: No. So it was a combination between super fit and <unk>.
Speaker Change: Converting the one muscle meat, the last muscle acre grille location over to a franchise location.
Speaker Change: So far just with what we have today and there's other options out there that we are utilizing their not just trade finance line.
Speaker Change: So the total proceeds of those two we're kind of in that 400000 range.
Speaker Change: So again nothing material coming out of those but it's the first step and really truly divesting these things and move forward the muscle maker grille restaurants.
Speaker Change: And then we're looking into like supplier credits.
Speaker Change: Insurances and other options that allow you to tap in there without actually having trade finance.
Speaker Change: Got it Okay last one from me is did I hear you say super fit proceeds were $400000.
Speaker Change: We will be larger should be anyway than superfood foods and obviously the big one that we're working on are spoken modal that's the larger of the three concepts that are going out there. Those are both still being worked on right now and just kind of add on to that with that those sales. We did not take a loss on those right.
Speaker Change: No. So it was a combination between super fit.
Speaker Change: Converting the one muscle meat, the last muscle acre grille location over to a franchise location.
Speaker Change: So the total proceeds of those two we're kind of in that 400000 range.
Speaker Change: On the power of those two items okay.
Speaker Change: So again nothing material coming out of those but it is the first step and really truly divesting these things and move forward the muscle maker grille restaurants.
Speaker Change: Got it that's all I have for today. Thank you.
Speaker Change: Thanks, Tom if there arent any more questions that concludes our Q&A portion of the call Mr. Robert any final comments.
Speaker Change: It will be larger should be anyway than super foods, and obviously the big one that we're working on are spoken modal that's the larger of the three concepts that are going out there. Those are both still being worked on right now and just kind of add on to that with that those sales. We did not take a loss on those right.
Speaker Change: Want to thank everybody for being shareholders and go onto us in this adventure that we have as we grow this company.
Speaker Change: You know a lot of good things in the future that are coming up and as I think you've seen a lot of good things that have happened here in the recent past as well that continues to propel us to become a larger player in the industry, but again, just thanks to everybody for their patience and I appreciate all the questions and cooperation and comments.
Speaker Change: On the power of those two items okay.
Speaker Change: Got it that's all I have for today. Thank you.
Speaker Change: Thanks, Tom if there aren't any more questions that concludes our Q&A portion of the call Mr. Robert any final comments.
Speaker Change: The suggestions that everything that everybody makes whatever thats out there so doing our best and moving forward.
Speaker Change: Just wanted to thank everybody for being shareholders and go onto us in this adventure.
Mr. Robert: As we grow this company.
Speaker Change: You know a lot of good things in the future that are coming up and as I think you've seen a lot of good things that have happened here in the recent past as well that continues to propel us and become a larger player in the industry, but again, just thanks to everybody for their patience and I appreciate all the questions and cooperation and comments.
Speaker Change: The suggestions that everything that everybody makes whenever that's out there so doing our best and move forward.
Speaker Change: Okay.